Why We Still Can't Erase the Gender Pay Gap

July 11, 2014

It would be fair to assume that we’re making steady, if slow, progress in equalizing pay between men and women as women become better educated and make inroads into the workforce. The gap did in fact narrow at a quick clip between the 1960s and 1990s and then kept shrinking—by 9.7 percentage points in the 1990s and by 3.1 points in the 2000s. But over the last decade, progress has slowed to a crawl: We’ve reduced the gap by just 1.7 percentage points. Today, women who work full-time, year-round make 77 percent of what men do.

So how can we earn back that momentum and erase that stubborn difference? A simple solution may still be unfeasible, at least politically: the Paycheck Fairness Act, which has been introduced ahandfuloftimes, starting in 2009, but has always been blocked by Republicans. It would, most importantly, prohibit employers from telling their workers they can’t discuss pay with peers, tighten the rules for what counts as a legitimate reason for gender pay disparities, and increase the penalties for unfair pay.

Considering such political impossibilities, it may be time to break it into bits and find other piecemeal solutions. One part of that lies with the courts, but before women can begin suing, they have to know what their co-workers make. The very first step would be to ban salary secrecy—the practice that employers have of prohibiting or strongly discouraging their workers from talking about compensation with each other. About half of employees toil under such regimes. President Obama recently issued an executive order that gets rid of salary secrecy for companies that contract with the government, impacting about 22 percent of the workforce. It’s progress, but it still leaves the vast majority of workers unprotected; the Paycheck Fairness Act would extend it to all Americans.

In the public sector, salary secrecy isn’t much of an issue, offering insight into what the gender wage gap looks like without this obstacle. A much smaller share of federal employees say they’re discouraged from talking about their salaries than private-sector employees do, and the government’s pay structures are mostly rigid and transparent anyway. Lo and behold, female federal employees make just 11 percent less than male ones, a much better gap than the 23 percent overall. The federal wage gap has also made steady progress, dropping from 25 percent in 2007. Unionized workers also typically have more information about their colleagues’ compensation, and women who belong to unions make just 9.4 percent less than men—a figure that similarly continues to decline.

Salary transparency is starting to slowly seep out of the public sector and into the private one. Some technology start-ups have made all employees’ pay available to everyone. Part of the motivation is the tech world commitment to the principle of transparency in everything they do. But one data analytics company, SumAll, also says the practice has brought increased output from employees who don't have to spend energy worrying about secret pay scales and the ability to attract and retain talented people. Research backs it up, finding that giving employees information about everyone’s pay boosts productivity.

Still, a gap remains even in workforces with transparent pay, and manystudies that have examined the factors in gendered wage differences have found a portion that is unexplainable. We will likely never be truly rid of old-fashioned discrimination, whether conscious or unconscious. When it happens, though, women are supposed to be able to bring court cases against their employers. But employees only win about a third of their equal pay claims—a fall from a little more than half in the ’90s.

One way to give women a fighting chance would be to increase the penalties if it’s found that employers unfairly pay female employees less, as the Paycheck Fairness Act would do. If an action carries a big enough consequence, employers will be more vigilant in ensuring it doesn’t happen in the first place.

That’s something that happened with sexual harassment: A particular case in 1998, EEOC v. Mitsubishi, involved a $34 million settlement with 300 to 400 class members. Clearly sexual harassment isn’t a thing of the past, but it spurred employers to take it seriously and act preemptively. The headlines that the case generated, as well as the those when Anita Hill testified before a Senate committee about sexual harassment at the hands of now-Supreme Court Justice Clarence Thomas, also likely made women aware of what their rights were. A big-name wage-discrimination case might have the same effect and pour sunlight’s disinfectant on the issue.

While these solutions would likely help reduce the wage gap, they all still put the onus on the women who need the help. That’s a big ask. Many women may be afraid to risk their jobs, careers, and resources to make a discrimination complaint (particularly considering that such a low percentage win their suits). A totally different solution that was in vogue in the ’70s and ’80s is “pay equity”: the idea that women doing comparable yet different work to men—but not the exact same job—should be paid the same. (Think a maid, who tends to be female, being paid the same as a janitor, who tends to be male.) There’s a real difference in pay between traditionally female jobs and traditionally male jobs. At the low-wage end, jobs that are 75 percent or more female pay nearly $150 less each week than those that are 75 percent men. At the high end, women’s work pays about $470 less.

By 1989, 20 states had made pay equity wage adjustments among their own employees, spending more than $527 million to raise the pay for women’s jobs that were being paid less than similar male ones. And they eliminated just under 20 percent of the wage gap. Minnesota still has this policy in place today, and a few others have weaker versions still going.

Besides giving low-paid women the same money as men doing very similar work, these policies have the added benefit of requiring a regular review of pay scales to make sure nothing has slipped. In Minnesota, state and local governments have to review their systems every three years and report whether they are compliant—in other words, whether any pay discrepancies crept back in. Last year, the most recent cycle, 64 percent of them were initially out of line, but 99 percent were equitable by the end of the process. The female public employees, meanwhile, didn’t have to lift a finger to see their pay increase.

This effort, sadly, has all but disappeared compared to how many states were participating in the ’80s. Many of them only did one-time assessments and never revisited the issue. Republicans, who used to be supporters of pay equity, eventually became opponents. And a number of legal setbacks deflated the movement.

The workplace itself will have to change, too, if we want to eliminate the gender wage gap. Women often interrupt their careers when they have children, which is responsible for a little more than 10 percent of the wage gap. Because the United States doesn’t require paid leave and only 12 percent of workers get it through their employers, a quarter of women either quit their jobs or are let go when they have a baby. But women who get paid leave are more likely to return to their jobs and are 54 percent more likely to get a raise than those who take unpaid time off.

Affordable, accessible child care may be even more important. About 40 percent of women say at some point they had to reduce their hours to care for a child or other family member, while a little over a quarter had to quit their jobs. (Men are far less likely to have taken either step.) That has a huge impact on their wages. But women with steady child-care arrangements are twice as likely to stay in their jobs, which helps their pay. Flexibility on hours could also play an enormous role: Harvard economist Claudia Goldin has found that the gender wage gap “would be considerably reduced and might even vanish” if companies didn’t reward long hours at particular times and instead prorated pay based simply on hours logged, regardless of when they happen.

Any one of these approaches could reignite the progress toward pay equality that was made in previous decades. All together, they just might ensure that women’s work is fairly compensated. Without any action, however, women will keep entering the workforce and growing the country’s economy, while not getting their fair share.